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Cutting Unconventional Well Costs a Balancing Act, Says Accenture

Oil and natural gas operators may be able to reduce the costs to drill and complete unconventional wells by up to 40% by integrating logistics, contractors and materials, Accenture research has found.

For a "higher performing" well that might cost around $6.5 million, managing logistics better could save $1.3-2.5 million, and for "low performers," the cost savings would be "much more," the consulting firm said in the study issued on Monday. The study mirrored some comments made by Halliburton Co. executives also on Monday, who noted that implementing better logistics to manage supplies for unconventional wells was making operations more efficient (see related story).

"Operators can achieve these savings by adopting a more integrated planning process, better management of service contractors, and improved logistics and materials management for fresh and reused water, proppant and installed equipment," the report noted. "This approach can also reduce the time to deliver an average unconventional well by up to 40%," reducing the time by up to 170 days, down to 254 days from 464 days.

The research is based on a survey of North American operators that work in multiple basins, as well as indepth, half-day interviews with a variety of operators that work in the Eagle Ford Shale to compare how they address similar challenges, and to identify areas of differentiation.

"Using Eagle Ford Shale as a model we found that while operators in the top quartile spend about $6 million per well, some still struggle to deliver wells for twice that amount," said Accenture's Melissa Stark, global managing director for new energy. "To generate the maximum savings and efficiencies, operators need to carefully balance their investments in technology, continuous improvement and people, and in the low-margin environment of unconventionals, trade-offs will need to be made.

"For example, is investment in new rig technology a better choice than offering incentives to your service provider to ensure consistency of crew?"

Several ways operators may be able to improve performance include through integrated planning, logistics management, managing service contractors and materials management, Accenture reported.

"Our research suggests that large independent operators are best positioned to implement these improvements, as they tend to have a trade-off mindset when it comes to investments in technology, continuous improvement and people," Stark said. "They know that you cannot invest in all three all of the time as that would be too expensive."

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